estate business or the insurance business is that they will in the not-too-distant future strangle competition, with their inherent clout. There will be fewer players, less, not more, competition. I recognize that the sister corporation idea takes away the advantage banks have in deducting the interest costs of municipal bond inventory and also makes it possible for the Securities and Exchange Commission to regulate the securities business separately, but beyond that I don't think it does auch. The uniqueness of bank credit power remains. I recognize the probles that exists with some of the federal regulators who want to use the same Glass-Steagall loophole I spoke of sarlier to allow state banks which aren't members of the Federal Reserve System to sell common stock. I think that is a terrible idea and should be stopped. And this current competition that is going on among states to loosen bank regulations or to let banks enter heavens-knows-what businesses insurance, securities · should be stopped. National financial policy should be established in Washington, not Pierre, South Dakota or evan Salt Lake City. I's for a moratorium. I'd like Congress to blow the whistle and get on with figuring out what's better. Not better for Citibank or Dean Witter, but better for America. How Congress tackles the probles, whether each banking committee should develop its own studies and reports, whether a commission should be established of people from the industries involved, I leave to Congress. But before we jump out the window into the brave new world we should have a better idea of what the lay of the land is beneath us. We don't want another sluggish financial landscape dominated by a few giant banks, like Germany's. Thank you Mr. Chairman for the time. I hope these few remarks have been useful. I certainly am ready to answer any of your questions, although I am not an expert in these matters. I just believe strongly in the principles I have stated. [EDITORIAL COMMENT: Whereupon, the statement of Mr. Dance will be inserted into the record with the following changes: (1) On page 3, paragraph one, starting in the middle of the paragraph, was changed as follows: "I know this is true because I have been in the insurance business for 10 years prior to this and I know it happens." The rest of the paragraph is deleted. (2) On page 4 near the end of the page the following words were deleted: "They would buy the advisory firm and not the clients' assets managed. The stock of all mutual fund advisory firms are worth about $49 billion while The statement continues with, "The assets of Bank of America and * (3) Added to the end of his statement on page 7 are the following sentences: "The banking system is conflict prone, concentrated, and becoming more so. I don't believe we want to accelerate those trends nor to encourage any actions which have the slightest chance of undermining the stability of the financial institution."] * * * 99 * * 99 [Complete statement follows:] Revised March 1, 1984 TESTIMONY OF HAROLD W. DANCE BEFORE THE UNITED STATES SENATE COMMITTEE ON SALT LAKE CITY, UTAH My name is Harold Dance and I am President of Harold Dance Brokerage, a securities brokerage firm located in Logan, Utah. I am a graduate of Utah State University and have an M.B.A. from Harvard Graduate School of Business. I am a charter member of the International Association of Financial Planners and one of the first four people to pass the exams to become a certified financial planner. I also have a professional degree in Property and Casualty Insurance - CPCU. operate a securi ties firm and act as an insurance broker. I greatly appreciate the opportunity to testify before you today. My testimony will deal with the legislative proposal currently being considered by your Committee which would authorize affiliates of commercial banks to sponsor mutual funds and to distribute their shares to the public. My views regarding this proposal are based on my experience as a distributor of mutual fund shares and other securities to our clients located in the State of Utah. I have been in the securities business for 25 years. My firm prides itself on the personal services which we render to our clients. I also welcome competition from other firms engaged in the securities business, ranging from other local Utah broker-dealers to national securities firms with offices in this State. However, I believe that entry by commercial banks into the mutual fund business would create an inherently unfair system of competition. I don't know what this would do to the few giants in the securities business like Merrill Lynch but I can tell you that it would probably put the small securities firms out of busi ness. Commercial banks enjoy a number of major economic advantages over securitie firms and all other businesses. Banks have a governmental license to accept deposits; these deposits are federally insured and this enables banks to obtain funds at lower cost4s than securities firms and other businesses. Banks have ready access to low cost capital through access to the federal funds market and the Federal Reserve Board's discount window. My firm and other securities firms do not possess these advantages. I believe that it would be grossly unfair to permit commercial banks to compete with us in the mutual fund business utilizing their cheaper cost of funds derived from these special economic advantages. Equally important is the fact that banks are the dominant source of credit to business firms and individuals in the State of Utah. Every business and every individual relies on his bank for loans. And every borrower naturally believes that his bank will be more inclined to extend credit to him if he purchases other products and services from his bank. This is simply human nature. Similarly it would be simple human nature for a bank officer who is considering whether to make a loan to 30-927 0-84--24 a customer to "recommend" that the customer purchase mutual fund shares and insurance from that bank and in a fund sponsored by that bank or its correspondent. A list of loans would be kept and the bank's insurance and mutual fund departments would be expected to complete the account. The employees of these departments would be harassed until the package was sold with all the coercion of the loan as a backup. I know this is true because I have been through it in the insurance business. If banks are permitted to enter the mutual fund business, our customers will naturally feel pressure to buy fund shares from the banks which make them loans rather than dealing with independent securities firms. This is not fair nor is it to the advantage of the public in the free choice of financial vices. ser I realize that some Utah bankers may believe that it would be to their advantage to be able to sponsor mutual funds and to offer fund shares to citizens of Utah. However, I think that enactment of the proposal would not benefit Utah bankers and could actually be detrimental to them. Banks have the reputation of safety; security brokers of risk. The sale of securities by banks may well cause a loss of confidence in the bank's reputation for security. Own I believe that few, if any, Utah banks will sponsor their mutual funds. In fact, a 1983 study prepared by Arthur Young & Company for the American Bankers Association concluded that "For the small community bank, fund management is not cost |